Russian sanctions bite in strange ways

Tuesday, October 14, 2014 - 02:12

China's Prime Minister meets President Putin in Moscow as Russia increasingly looks east. But with western sanctions biting and the rouble falling again, Sonia Legg looks at whether Chinese help can come fast enough.

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Alexander Krupetskov thought he had a good nose for business when he opened a boutique cheese shop in the centre of Moscow.
At the time Russia was importing 1.3 billion euros worth of cheese, curd and butter from the EU.
But weeks later the Ukraine crisis happened and western sanctions were imposed.
(SOUNDBITE) (Russian) BOUTIQUE CHEESE SHOP OWNER, ALEXANDER KRUPETSKOV, SAYING:
"I never imagined there would be sanctions. Naturally, it's a huge disadvantage for me, because a huge part of my stock is now under embargo."
Alexander is trying to find Russia producers to supplement his stock.
But they're hard to find - and Moscow can no doubt appreciate his plight.
The government is largely doing the same - only China is its key source of alternative funds and trade.
It was President Putin's turn to woo China's Prime Minister a day after 38 deals were signed further linking the world's biggest country with the world's most populated one.
(SOUNDBITE) (Russian) RUSSIAN PRESIDENT, VLADIMIR PUTIN, SAYING:
"(OVER CHINESE DELEGATES AT TABLE) I am very happy to point out that China takes one of the leading positions (BACK TO PUTIN) in the scale of capital investment in Russia's economy."
Cyprus, Luxembourg and the Netherlands are currently ranked above China - largely thanks to their attractive tax regimes.
But China clearly sees potential.
(SOUNDBITE) (Mandarin) CHINESE PRIME MINISTER, LI KEQIANG, SAYING:
"I like what you have just said that we have to look at the growth, that China is Russia's fourth largest investor, but you regard it as the most important one. I think although it is now in fourth place the scope for mutual investments with China can definitely grow."
Energy firms were big winners but Adam Myers from Credit Agricole says he believes the common ground could end there.
(SOUNDBITE) (English) ADAM MYERS, CREDIT AGRICOLE, SAYING:
"There have already been previous agreements for Russian gas to be priced in renmimbi and I think that is a trend we will see over time to help facilitate that liberalisation of the capital account. Whether that translates into something more meaningful, i.e. beyond energy policy, I don't think that is on the table at the moment."
And the rouble fell again on Tuesday to another record low - prompting the central bank to change the intervention rules again.
That doesn't help Alexander.
He's now looking to Switzerland and Ireland for new cheeses, along with Israel, Argentina and even Tunisia - times are clearly changing.